India has levied 28% GST on the entire amount in case of payments made for gaming and real-money-gaming. It’s a controversial decision, with lobbyists for the Real Money Gaming industry, and some astro-turfing consumer group criticising this development. A comprehensive overview here on MediaNama.
I’ve spoken publicly about this issue:
- The online realmoney gaming industry has essentially been treated equally with gambling, when it comes to taxation. In my opinion, they’re not very different, and many countries across the world regulate online real money gaming in the same way that they regulate gambling.
- Lobbying over the last two years has focused on driving a distinction between real-money-gaming and gambling, and even sought to treat is as a type of gaming. Even now, comments from lobbyists suggest that “gaming will be destroyed” by this move. In the past, they’ve tried to position themselves as “eSports”, which failed. What irks me is this false equivalence with gaming: Gaming isn’t dependent on people playing to earn: it’s dependent on people playing to win. There’s a difference.
- India’s Ministry of Electronics and IT recognised them as online real-money gaming intermediaries even though:
- The IT Act doesn’t allow creating these new definitions.
- Gaming isn’t an intermediary function: there are controls and gameplay, as well as algorithmic behavior, that are determined by the Platform. Traditionally, games are traditionally “publishers”, and creators of entertainment. To the extent, they’re a new form of entertainment, because the environment responds to your behavior.
- MEITY seems to have jumped through hoops to twist definitions and processes to accomodate the online realmoney gaming industry as a gaming industry under the IT Act, in the IT Rules. There’s a major case in TN about jurisdiction, and gambling is regulated by states. Given the Levels of addiction, TN passed a bill to ban online realmoney gaming/gambling. Telangana hasn’t been too keen on them either. Hence the forum shopping with MEITY, where they’ve found favour, including with MoS for IT, Rajeev Chandrasekhar. I mean, if India wants to legalise gambling, let’s do that. I don’t think MEITY’s “creativity” in dealing with this issue reflects well on those involved.
- Over the past year, we’ve seen advertisements without disclaimers about addiction, and promises of making multiples of money, which is an approach similar to gambling. The industry is worried that now, given that consumers are likely to win less, they’ll stop playing…there’s something deeply flawed about an industry that says that their users won’t play if they won’t make enough money when they win.
- Credit is due to India’s GST Council and Finance Ministry that they’ve seen through these shenanigans. Clearly there is a worry that this segment is too hot, and its clearly a sin segment. Addiction, indebtedness with payday loan apps, suicides, and they needed to open a valve and release some pressure. Remember crypto? Same kind of gambling situation, with promises of great returns. What did finmin do? In hindsight (and I was very critical of it initially), TDS was a pressure release. Around 60% drop in transactions in the first month. 28% GST will have the same effect on the so called “online realmoney gaming” industry. This is a welcome move. It’s good for consumers. Of course, there are court cases on, both around jurisdiction (state vs centre, gaming vs gambling ). There might be new cases around taxation. Watch this space.